MAJOR CHANGE to
IRS Form W-4 for 2020!
The IRS is doing a major make-over of Form
W-4. The new form reflects changes made by the Tax Cuts and Jobs Act, which took effect last year. Although it is still being finalized it’s important that employers know what changes are coming. The new design, according to the IRS, will reduce the form’s complexity and increase the transparency and accuracy of the withholding system. The form is alleged to be simpler for employees, however, it will create some significant challenges for employers. Essentially, it shifts the burden of several calculations from employees to the employer.
Beginning in 2020
, all new employees must use the redesigned form. Similarly, any employees hired prior to 2020 who wish to adjust their withholding must use the redesigned form. It’s important to note that employees hired in 2019 or prior are not required to update their form merely due to the redesign.
The challenge of this is that payroll systems must be able to accommodate the existing withholding allowance calculations, as well as the new method. The same set of withholding tables will be used for both sets of forms. You can apply these tables separately to systems for new and old forms. Or, rather than having two separate systems, you may prefer to use a single system based on the redesigned form. To do this, you could enter zero or leave blank information for old forms for the data fields that capture the information on the redesigned form but was not provided to you under the old design. Additional guidance will be coming on the payroll calculations needed based on the data fields on the new and old forms.
Here is a summary of what changes to anticipate: